Pristine.

com Presents

Guerrilla Trading Tactics

With

Oliver L. Velez

Founder of Pristine.com, and Author of the best selling book, Tools and Tactics for the Master Day Trader
Copyright 2002, Pristine Capital Holdings, Inc.

Disclaimer
It should not be assumed that the methods, techniques, or indicators presented in this book and seminar will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples in this book and seminar are for educational purposes only. This is not a solicitation of any order to buy or sell. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES IN THIS BOOK and SEMINAR HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS WE STATE MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. The authors and publisher assume no responsibilities for actions taken by readers. The authors and publisher are not providing investment advice. The authors and publisher do not make any claims, promises, or guarantees that any suggestions, systems, trading strategies, or information will result in a profit, loss, or any other desired result. All readers and seminar attendees assume all risk, including but not limited to the risk of trading losses. Guerrilla Trading can result in large losses and may not be an activity suitable for everyone. Copyright 1994-2002 by Pristine Capital Holdings, Inc. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright A of 1976, no part of this publication may be ct reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of the publisher.

Table of Contents

Introduction
The Bullish 20/20 Bar The Bearish 20/20 Bar

Guerrilla Trading Tactics Part I

The Pristine Gap-n-Snap Play Tactic One The Pristine Gap-n-Crap Play Tactic Two Bullish Gap Surprise Tactic Three Bearish Gap Surprise Tactic Four Bullish 20/20 Play Tactic Five Bearish 20/20 Play Tactic Six

Table of Contents

Guerrilla Trading Tactics Part II

The Bull Trap Tactic Seven The Bear Trap Tactic Eight The Bearish Mortgage Play Tactic Nine The Bullish Mortgage Play Tactic Ten

Putting It All Together

Guerrilla Trading BRCM Guerrilla Trading MU Guerrilla Trading LLTC

Introduction

Introduction

Four Styles of Trading

Types of Trading
Four Styles of Trading: Core; Swing; Guerilla; Micro Which fall into.

Two Broad Trading Categories: Wealth; Income

Two Broad Trading Categories Wealth Trading Styles

Core Trading
- Weekly Charts - Weeks to Months

Income Trading Styles

Guerilla Trading
- Daily & 60 Min - Hours to Days

Swing Trading
- Daily Charts - Days to Weeks

Micro Trading
- 5 Min & 15-Min - Minutes to Hours

Guerrilla Trading A Brief Description

The Guerrilla style of market play is our most cherished form of trading. The tactics contained in this brief course were designed specifically for the professional trader who seeks a frequent number of trading plays each day. The following tactics enjoy such a high degree of statistical accuracy that many of our professional in -house traders focus on them exclusively to earn their living in the markets. We have always taught that the professional trader needs only 2 to 3 highly reliable trading tactics in his or her arsenal in order to earn a comfortable living trading. You are about to be made aware of 10 such tactics. Guerrilla Tactics are designed for the trader who desires to grind out profits over a 1 to 2 day time frame. They do not often result in very large gains, but the consistency of their wins makes them an indispensable addition to your trading arsenal. With these 10 Guerrilla Trading Tactics, we believe your trading will be taken to an entirely new level. In advance, we d like to say, Welcome to Pristines Professional Trading Circle.

The Bullish 20/20 Bar

The Bullish 20/20 bar is defined by any wide-range period that has its open price near the low of that period and its close near the high of that period. We call it 20/20 because as a general rule, the open should be in the lower 20% of the periods range, and the close should be in the upper 20% of the periods range, making a long, green colored candlestick. Bullish 20/20 bars are far more important when they occur after at least one prior up bar. Several proceeding up bars make the 20/20 more significant.
Bullish Bullish 20/20 Bar 20/20 Bar

Close at or Close at or near the top of near the top of the bars range the bars range

Open at or Open at or near the near the bottom of the bottom of the bars range bars range

The Bullish 20/20 Bar

Important Points
Bullish 20/20 bars form the basis of many trading techniques. Bullish 20/20 bars have more significance when they occur after a decent move to the upside. We look for at least one prior up bar. The Bullish 20/20 bar signifies that many traders and investors are already long. This last fact is what sets up a possible reversal to the downside.
Bullish Bullish 20/20 Bar 20/20 Bar Close at or Close at or near the top of near the top of the bars range the bars range

Open at or Open at or near the near the bottom of the bottom of the bars range bars range

The Bearish 20/20 Bar

The Bearish 20/20 bar is defined by any wide-range period that has its open price near the high of that period and its close near the low of that period. We call it 20/20 because as a general rule, the open should be in the upper 20% of the periods range, and the close should be in the lower 20% of the periods range, making a long, solid dark candlestick. Bearish 20/20 bars are far more important when they occur after at least one prior down bar. Several proceeding down bars make the 20/20 more significant.

Open at or Open at or near the top near the top of the bars of the bars range range Bearish Bearish 20/20 Bar 20/20 Bar

Close at or Close at or near the near the bottom of bottom of the bars the bars range range

The Bearish 20/20 Bar

Important Points
Bearish 20/20 bars form the basis of many trading techniques. Bearish 20/20 bars have more significance when they occur after a decent move to the downside. We look for at least one prior down bar. The Bearish 20/20 bar signifies that many traders have already sold. This last fact is what sets up a possible reversal back to the upside.

Open at or Open at or near the top near the top of the bars of the bars range range Bearish Bearish 20/20 Bar 20/20 Bar

Close at or Close at or near the near the bottom of bottom of the bars the bars range range

Tactics Part I

The Pristine GapnSnap Play - Tactic One

This method works best as a one- to two-day trading tactic.

It works best on volatile NASDAQ stocks above $20 per share or NYSE stock above $40.

Properly used, this tactic can enjoy an 84% accuracy rate.

The Pristine GapnSnap Play - Tactic One The Setup / The Action
1. The stock should be down at least two days in a row. 2. We need a wide-range bar on the current day. At least $1.00 . 3. The open of the current day must be in the top 20% of the days price range. 4. The close must be in the bottom 20% of the days price range.
Stock down 2 days in a row.

The Pristine GapnSnap Play - Tactic One

The Setup /

The Action
Stock down 2 days in a row.

1. If the stock gaps open to the

downside by $0.50 or more, and then begins to rally back, buy it $0.05 to $0.10 above the previous days low. 2. Place a protective stop $0.05 to $0.10 below the current days low. 3. Sell for a $2 plus profit or on the 3rd day, whichever comes first.
Buy long at $0.05 to $0.10 above the previous days low.

Stop loss $0.05 to $0.10 below the current days low.

Stock gaps down at the open.

The Pristine GapnCrap Play - Tactic Two

This method works best as a one- to two-day trading tactic.

It works best on volatile NASDAQ stocks above $20 per share or NYSE stocks above $40.

Properly used, this tactic can enjoy an 84% accuracy rate.

The Pristine GapnCrap Play / Tactic Two The Setup / The Action
1. The stock should be up at least two days in a row. 2. We need a wide-range bar on the current day. At least $1.00. 3. The open must be in the low 20% of the days range. 4. The close must be in the high 20% of the days range.

Stock up 2 days in a row.

The Pristine GapnCrap Play / Tactic Two

The Setup /

The Action
Stock gaps up at the open .

1. If the stock gaps open to the upside by $0.50 or more, and then begins to fall back, sell (short) $0.05 to $0.10 below the previous days high. 2. Place a protective stop $0.05 to $0.10 above the current days high. 3. Cover for a $2 plus profit or on the 3rd day, whichever comes first.

Stop loss $0.05 to $0.10 above the current days high.

Stock up 2 days in a row.

Sell short at $0.05 to $0.10 below the previous days high.

Gap n Snap Play

Sell

Buy

Gap n Snap

Chart Courtesy of Mastertrader.com

Gap n Crap Play

Gap n Crap Short

Cover

Chart Courtesy of Mastertrader.com

Bullish Gap Surprise Tactic Three

This method works best as a one- to two-day trading tactic.

It works best on volatile NASDAQ stocks above $20 per share or NYSE stocks above $40.

Properly used, this tactic can enjoy an 84% accuracy rate.

Bullish Gap Surprise Tactic Three The Setup / The Action

1. The stock should be down at least two days in a row. 2. We need a wide-range day of at wideleast $1.00. 3. The open must be in the top 20% of the days range. day 4. The close must be in the bottom 20% of the days range. day 5. Above average volume on the current day (optional).
Above average or climactic volume. Stock down 2 days in a row.

Bullish Gap Surprise Tactic Three

The Setup /

The Action
Stock down 2 days in a row.

1. If the stock opens (gaps) up by at least $0.50 to $1 above the previous days closing price, buy it immediately. You can also buy it above the first 5min. high (Conservative). 2. Place a protective stop $0.05 to $0.10 below the prior days low. 3. Sell for a $2 to $3 plus profit or on the 3rd day, whichever comes first.

Stop loss $0.05 to $0.10 below the prior days low.

Stock gaps up at the open. Buy immediately.

Above average or climactic volume.

Bearish Gap Surprise Tactic Four

This method works best as a one- to two-day trading tactic.

It works best on volatile NASDAQ stocks above $20 per share or NYSE stocks above $40. Properly used, this tactic can enjoy an 84% accuracy rate

Bearish Gap Surprise Tactic Four

The Setup / The Action
1. The stock should be up at least two days in a row. We need a wide-range day of at least $1.00. The open must be in the bottom 20% of the days range. The close must be in the top 20% of the days range. Above average volume on the current day (optional).

2. 3.

Stock up 2 days in a row.

4.

Above average or climactic volume.

5.

Bearish Gap Surprise Tactic Four

The Setup /

The Action
Stock up 2 days in a row.

1. If the stock opens (gaps) down by at least $0.50 to $1 below the previous days closing price, sell (short) it immediately. You can also sell it short below the first 5 min. low. 2. Place a protective stop $0.05 to $0.10 above the prior days high. 3. Cover for a $2 to $3 plus profit or on the 3rd day, whichever comes first.

Stop loss $0.05 to $0.10 above the prior days high.

Above average or climactic volume.

Stock gaps down at the open. Sell immediately.

Bullish Gap Surprise (+BGS)

Bull Trap

+BGS +BGS

+BGS

Chart Courtesy of Mastertrader.com

Bullish Gap Surprise (+BGS)

+BGS Bullish Gap Surprises

Chart Courtesy of Mastertrader.com

Bearish Gap Surprise (-BGS)

-BGS

Major Support

Chart Courtesy of Mastertrader.com

Bullish 20/20 Play Tactic Five

This method works best as a one- to two-day trading tactic.

It works best on volatile NASDAQ stocks above $20 per share or NYSE stocks above $40.

Properly used, this tactic can enjoy an 84% accuracy rate

Bullish 20/20 Play Tactic Five

The Setup / The Action
This play has slightly better odds on the bullish side. 1. 2. 3. 4. 5. The stock should be down at least two days in a row. We need a wide-range day of at least $1.00. The open must be in the top 20% of the days range. The close must be in the bottom 20% of the days range. Above average volume on the current day (optional).
Stock down 2 days in a row.

Above Average Volume.

Bullish 20/20 Play Tactic Five

The Setup /

The Action
Stock down 2 days in a row.

1. If the stock opens less then $0.50 point above or below the previous days low, wait for 30 minutes of trading to transpire. Then, buy the stock an $0.05 to $0.10 above the high established during the first 30 minutes of trading. 2. Place a protective stop $0.05 to $0.10 below the current days low or the previous days low, whichever is lower. 3. Sell for a $2 plus profit or on the 3rd day, whichever comes first.

Stop loss $0.05 to $0.10 below the lowest low of the last two days.

Stock opens relatively even. Use 30-Min. Buy Rule.

Above Average Volume.

Bearish 20/20 Play Tactic Six

This method works best as a one- to two-day trading tactic.

It works best on volatile NASDAQ stocks above $20 per share or NYSE stocks above $40.

Properly used, this tactic can enjoy an 84% accuracy rate.

Bearish 20/20 Play Tactic Six

The Setup / The Action
1. The stock should be up at least two days in a row. 2. We need a wide-range day of at least $1.00. 3. The open must be in the bottom 20% of the days range. 4. The close must be in the top 20% of the days range. 5. Above average volume on the current day (optional).
Stock up 2 days in a row.

Above Average Volume

Bearish 20/20 Play Tactic Six

The Setup /

The Action
Stop loss $0.05 to $0.10 above the highest high of the last two days.

1. If the stock opens less then point above or below the previous days high, wait for 30 minutes of trading to transpire. Then, sell short the stock $0.05 $0.10 below the low established during the first 30 minutes of trading. 2. Place a protective stop $0.05 to $0.10 above the current days high or the previous days high, whichever is higher. 3. Cover for a $2 plus profit or on the 3rd day, whichever comes first.

Stock up 2 days in a row.

Above Average Volume

Stock opens relatively even. Use 30-Min. Sell Rule.

Bear 20/20 Play

Bear 20/20

Tactics Part II

The Bull Trap Tactic Seven

This method works accurately on stocks in all price ranges. It is best used as a multi-day strategy, and can result in huge gains. It should be played with smaller than normal trading lots. Properly used, this tactic can enjoy an incredible 91% accuracy rate. When the Bull Trap fails though, it can result in a big loss.

The Bull Trap Tactic Seven

The Setup / The Action
1. 2. 3. 4. The current bar must represent a very bullish day. Note: Preferably this day has been proceeded by a multi-day upward move. The open must be in the bottom 20% of the days range. The close must be in the top 20% of the days range. Above average volume on the current day (optional).

The Bull Trap Tactic Seven

The Setup /

The Action

1. Short the stock $0.05 to $0.10 below the low of the prior day (the Bull day) if it s been violated. Note: Some traders may prefer to short the stock near the close, as it is hard to determine if the stock will remain below the low of the Bull day. 2. Place a protective stop $0.05 to $0.10 above the current days high or the previous days high, whichever is higher . 3. Cover for a $2 to $3 profit or on the 5th day, whichever comes first.

The dotted red lines in Examples A D show where the trader goes short. Keep in mind that the Bull day does not need to be as wide as the typical 20/20 day. The key to this strategy lies in the immediate break to the downside.

The Bear Trap Tactic Eight

This method works accurately on stocks in all price ranges. It is best used as a multi-day strategy, and can often result in huge gains. It should be played with smaller than normal trading lots. Properly used, this tactic can enjoy an incredible 91% accuracy rate. When the Bear Trap fails though, it can result in a big loss .

The Bear Trap Tactic Eight

The Setup / The Action
1. 2. 3. 4. The current bar must represent a very bearish day. Note: Preferably this day has been proceeded by a multi -day down move. The open must be in the top 20% of the days range. The close must be in the bottom 20% of the days range. Above average volume on the current day (optional).

The Bear Trap Tactic Eight

The Setup /

The Action

1. Buy the stock $0.05 to $0.10 above the high of the prior day (the Bear day) if its been violated. Note: Some traders may prefer to buy the stock near the close, as it is hard to determine if the stock will remain above the high of the Bear day. 2. Place a protective stop $0.05 to $0.10 below the current days low or the previous days low, whichever is higher. 3. Cover for a $2 to $3 profit or on the 5th day, whichever comes first.

The dotted red lines in Examples A C show where the trader goes long. Keep in mind that the Bear day does not need to be as wide as the typical 20/20 day. The key to this strategy lies in the immediate break to the upside.

Bull & Bear Traps

Bull Trap *
* The Bull Trap was a Bearish Gap Surprise Play first. The Guerrilla Trader got two solid signals to go short UTX.

Bear Trap

Chart Courtesy of Mastertrader.com

Bear Trap Play

Sell

Buy Bear Trap

Chart Courtesy of Mastertrader.com

Bear Trap Play

Short Bear 20/20 Play Sell

Cover

Buy Bear Trap

Chart Courtesy of Mastertrader.com

The Bearish Mortgage Play Tactic Nine

This short method, while accurate, will deliver huge losses when it fails. It is also an excellent intra-day tactic, but is best applied to the 60-min time frame at the open. This short tactic is actually a derivative of the Bull Trap. Properly used, this short tactic can enjoy a 94% accuracy rate (3 to 10 day holding period on average).

The Bearish Mortgage Play Tactic Nine The Setup / The Action
1. Bar 1 must be a bullish 20/20 bar. This is the bar that indicates that a large number of longs have been committed. Note: The smaller the upper and lower tails on Bar 1 the better. 2. Bar 2 must open below the low of Bar 1. Note: The Mortgage Play is only a two -bar strategy.

Open

The Bearish Mortgage Play Tactic Nine

The Setup /

The Action

1. Immediately short at the market when

Bar 2 opens below the low of Bar 1. Note: This signifies that now every hedge fund, mutual fund, trader, and investor who bought during Bar 1 is now in negative territory. All longs are thrown for a loop.

2. Place your stop just over the high of

Bar 1. Note: This makes this tactic very 1. high risk . If it fails, the loss is typically risk. large, unless the range of Bar 1 is not that big and the gap down is not that large or severe. Many traders may want to opt for an arbitrary stop.

Short at Open
The Mortgage Short Play requires a great deal of faith on the part of the trader. Not only must the trader wholeheartedly believe in the accuracy of the strategy, he must have the stomach and the proper size bank account that can handle taking the large loss without much damage, if need be. Note how far away the stops, signified by the dotted red lines, are in Examples A B. We encourage playing small. Big potential gains go hand in hand with big potential losses. ?

3. Use a trailing stop strategy until a) your

objective has been met, b) the high of a reversal bar has been violated or c) a gap down occurs.

The Bullish Mortgage Play Tactic Ten

This long method, while accurate, will deliver huge losses when it fails. It is also an excellent intra-day tactic, but is best applied to the 60-min time frame at the open. This long tactic is actually a derivative of the Bear Trap. Properly used, this long tactic can enjoy a 94% accuracy rate (3 to 10 day hold on average).

The Bullish Mortgage Play Tactic Ten The Setup / The Action
1. Bar 1 must be a bearish 20/20 bar. This is the bar that indicates that a large number of traders have sold. Note: The smaller the upper and lower tails on Bar 1 the better. Bar 2 must open above the high of Bar 1. Note: The Mortgage Play is only a two -bar strategy.

2.

Open
A B

The Bullish Mortgage Play Tactic Ten

The Setup /

The Action

1. Immediately buy at the market when

Bar 2 opens above the high of Bar 1. Note: This signifies that now every hedge fund, trader, and investor who sold short during Bar 1 is now in negative territory. All shorts are thrown for a loop.

2. Place your stop just below the low of

Bar 1. Note: This makes this tactic very high risk. If it fails, the loss is typically large, unless the range of Bar 1 is not that big and the gap up is not that large or severe. Many traders may want to opt for an arbitrary stop.

Buy at Open

3. Use a trailing stop strategy until a)

your objective has been met, b) the low of a reversal bar has been violated or c) a gap up occurs.

The Mortgage Short Play requires a great deal of faith on the part of the trader. Not only must the trader wholeheartedly believe in the accuracy of the strategy, he must have the stomach and the proper size bank account that can handle taking the large loss without much damage, if need be. Note how far away the stops, signified by the dotted red lines, are in Examples A B. We encourage playing small. Big potential gains go hand in hand with big potential losses. ?

Bull Mortgage Play

10 Days Later

Buy

Bull Mortgage Play PBS

Chart Courtesy of Mastertrader.com

Bearish Mortgage Play

Bearish Mortgage Play Short

10 Days Later

Chart Courtesy of Mastertrader.com

Putting It All Together

Bear Mortgage Play Short Sell 10 Days Later

Buy Bull Gap Surprise

Bear Trap

Chart Courtesy of Mastertrader.com

Putting It All Together

Bear 20/20 Bull Trap -BGS & Bull Trap

Bear Trap

+BGS

Bull 20/20

Chart Courtesy of Mastertrader.com

Putting It All Together

Failed Bear 20/20

Bear 20/20 Bull 20/20 Plays

Bull Gap Surprise Bull 20/20 Play

Bull Gap Surprise

Chart Courtesy of Mastertrader.com

Putting It All Together

Pristine CSS -BGS

PBS

Bull Trap Gap n Snap Big Volume

Chart Courtesy of Mastertrader.com

Putting It All Together

Bear 20/20

Bearish Gap Surprise

Bear Trap

Chart Courtesy of Mastertrader.com

Putting It All Together

PBS PBS 200 MA

Chart Courtesy of Mastertrader.com

Tools & Tactics A Must Read

A Japanese proverb says, If you wish to know the road, inquire of those who have traveled it. The authors of Tools and Tactics for the Master Trader clearly know the road. Their unique insights, trading tactics and powerful tools, so enjoyably presented, make this a book that belongs on every traders shelf. Steve Nison, CMT - Author of Japanese Candlestick Charting Techniques

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